Vodafone vows not to pay over top for Hutch Essar

London, Feb 1: Vodafone Group Plc vowed not to pay ''over the top'' in the multi-billion-pound battle for India's Hutchison Essar as it reported forecast-beating subscriber growth and crossed the 200 million user milestone.

Chief Executive Arun Sarin said on Wednesday final bids in the auction for a controlling stake in India's fourth-biggest mobile operator were still weeks away and that the probability of Vodafone's success remained ''very hard to call''.

''I certainly hope for all our collective sanities that it (the deal) is in February,'' said Sarin.

The group, Europe's most valuable telecoms company, is one of at least four bidders eyeing a 67 percent stake put up for sale by parent Hong Kong's Hutchison International .

Vodafone has been accused by some investors of overpaying for acquisitions in the past, most recently in its .55 billion purchase of Turkey's Telsim in December 2005.

The group behind the most expensive acquisition in history -- the 180 billion euro purchase of Germany's Mannesmann in 2000 -- last year unveiled strict acquisition criteria after relations with some investors had reached a boiling point.

Sarin and Chief Financial Officer Andy Halford told analysts that any purchase would be financed entirely through debt and that this would not affect the company's credit rating.

''The reiteration of strict investment criteria for acquisitions should ... allay the fear that they will overpay in India, even though the competition for (Hutch) Essar appears fierce,'' said Wesley McCoy at shareholder Standard Life.

The bidding for Hutchison Essar, ultimately controlled by Hong Kong-based ports-to-telecoms conglomerate Hutchison Whampoa , kicked off late last month with valuations of billion to billion but have reached as high as billion.

Vodafone, which is battling India's Reliance Communication and the Essar and Hinduja groups in the auction, has been keen to raise its exposure to India, the world's fastest growing mobile market, which is adding 6 million new users each month and has plenty of room to grow.

CROSSES 200-MILLION MARK

The world's biggest mobile operator outside of China beat forecasts for new customer sign-ups, with 8.7 million customers taking up its services in the fiscal third quarter to Dec. 31, versus analysts' expectations of 7.5 million.

''It took us 15 years to get our first 100 million customers,'' Sarin told reporters. ''It took us five years to get the next 100 million. There is good momentum in the business.'' Subscriber growth in emerging markets is critical for Vodafone and its European rivals, which have reached full penetration of home markets and are facing declining prices due to competition and regulation.

Earlier this week, rival Deutsche Telekom sent shivers through the sector with second profit warning in six months, blaming fierce competition in the German market.

Vodafone said mobile revenue rose 6.1 percent in the key Christmas quarter, against a 6.2 percent growth forecast of 12 analysts polled by Reuters.

Almost all revenue growth came from emerging markets, where sales, excluding acquisitions, increased by 14.4 percent.

In Europe, voice revenues fell 0.5 percent despite 3.2 million new subscribers and a 17 percent increase in voice telephony minutes. Still, this decline was more than offset by strong growth in data such as email, video and messaging.

Overall service revenues increased by 2.1 percent in Europe, which was higher than the 1 percent the previous quarter.

''The third-quarter key performance indicators at Vodafone continue to show a more resilient picture in Western Europe than expected, with revenue growth in UK and Italy notable positives,'' noted Standard Life's McCoy.

Vodafone shares were up 1.9 percent at 149-} pence by 1440 GMT. The shares have gained about 28 percent in the past five months as they recover from a turbulent 2006, during which Sarin survived a rebellion from shareholders upset at his efforts to tackle slowing growth in core European markets.

The stock trades at 13.6 times forecast earnings, compared with 14.1 times for the DJ Stoxx European telecoms index.

Vodafone also reiterated its full-year forecasts that mobile revenue growth would be within a range of 5 to 6.5 percent and the mobile EBITDA margin one percentage point lower.

Reuters

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